Chapter1Chapter10MarketingChannels:DeliveringCustomerValue10-2PrenticeHall,Copyright2009Explainwhycompaniesusemarketingchannelsanddiscussthefunctionsthesechannelsperform.Discusshowchannelmembersinteractandhowtheyorganizetoperformtheworkofthechannel.Identifythemajorchannelalternativesopentoacompany.Explainhowcompaniesselect,motivate,andevaluatechannelmembers.Discussthenatureandimportanceofmarketinglogisticsandsupplychainmanagement.RestStop:PreviewingtheConcepts10-3PrenticeHall,Copyright2009BackgroundCaterpillardominatestheworld’smarketsforheavyconstructionandminingequipment.Independentdealersarepraisedasthekeytosuccess,providingcustomerservice,marketintelligence,andmore.Distributionsystemisacompetitiveadvantage.Caterpillar–TheVitalRoleofDealersCaseStudyBuildingPartnershipsDistributionsystemisbuiltonabaseofmutualtrustandshareddreams.Caterpillarworkswithdealerstobringvaluetocustomers.Caterpillarstressesdealerprofitability,extraordinarydealersupport,personalrelationships,frequent,full,andhonestcommunicationsanddealerperformance.10-4PrenticeHall,Copyright2009SupplyChainsandtheValueDeliveryNetworkProducingandmakingproductsavailabletobuyersrequiresbuildingrelationshipswith“upstream”and“downstream”supplychainpartners.►Upstream:Firmsthatsupplytherawmaterials,components,parts,andotherelementsnecessarytocreateagood.►Downstream:Marketingchannelpartnersthatlinkthefirmtothecustomer.10-5PrenticeHall,Copyright2009SupplyChainsandtheValueDeliveryNetworkValuedeliverynetwork:►Thenetworkmadeupofthecompany,suppliers,distributors,andultimatelycustomerswho“partner”witheachothertoimprovetheperformanceoftheentiresystemindeliveringcustomervalue.Marketingchannelsrepresentthedownstreamsideofthevaluedeliverynetwork.10-6PrenticeHall,Copyright2009NatureandImportanceofMarketingChannelsMarketingchannel:►Asetofinterdependentorganizationsthathelpmakeaproductorserviceavailableforuseorconsumptionsbytheconsumerorbusinessusers.10-7PrenticeHall,Copyright2009Howchannelmembersaddvalue:►Theuseofintermediariesresultsfromtheirgreaterefficiencyinmakinggoodsavailabletotargetmarkets.►Channelmembersofferthefirmmorethanitcanachieveonitsownintermsof:•Contacts•Experience•Specialization•ScaleofoperationNatureandImportanceofMarketingChannels10-8PrenticeHall,Copyright2009NatureandImportanceofMarketingChannelsTransactionfulfilling:►Physicaldistribution►Financing►RisktakingTransactioncompleting:►Information►Promotion►Contact►Matching►NegotiationKeyfunctionsperformedbychannelmembers:10-9PrenticeHall,Copyright2009Numberofchannellevels:►Thenumberofintermediarylevelsindicatesthelengthofachannel.•Directmarketingchannels►Havenointermediarylevelsbetweenthemanufacturerandthecustomer.•Indirectmarketingchannels►Containsoneormoreintermediaries.►Allchannelinstitutionsareconnectedbyseveraltypesofflows.NatureandImportanceofMarketingChannels10-10PrenticeHall,Copyright2009Thechannelwillbemosteffectivewhen:►Eachmemberisassignedtasksitcandobest.►Allmemberscooperatetoattainoverallchannelgoals.Ifthisdoesnothappen,conflictoccurs:►Horizontalconflictoccursamongfirmsatthesamelevelofthechannel(e.g.,retailertoretailer).►Verticalconflictoccursbetweendifferentlevelsofthesamechannel(e.g.,wholesalertoretailer).Someconflictcanbehealthycompetition.ChannelBehaviorandOrganization10-11PrenticeHall,Copyright2009Conventionaldistributionchannel:►Consistsofoneormoreindependentproducers,wholesalers,andretailers,eachaseparatebusinessseekingtomaximizeitsownprofitsevenattheexpenseofprofitsforthesystemasawhole.Verticalmarketingsystem(VMS):►Adistributionchannelstructureinwhichproducers,wholesalers,andretailersactasaunifiedsystem.►Onechannelmemberownstheother,hascontractswiththem,orhassomuchpowerthattheyallcooperate.ChannelBehaviorandOrganization10-12PrenticeHall,Copyright2009ChannelBehaviorandOrganizationTypesofverticalmarketingsystems:►CorporateVMS►ContractualVMS►Franchiseorganization►AdministeredVMS10-13PrenticeHall,Copyright2009ChannelBehaviorandOrganizationCorporateVMS:►Verticalmarketingsystemthatcombinessuccessivestageofproductionanddistributionundersingleownership.Channelleadershipisestablishedviacommonownership.ContractualVMS:►Verticalmarketingsysteminwhichindependentfirmsatdifferentlevelsofproduction/distributionjointogetherthroughcontractstoobtainmoreeconomiesofscalethantheycouldalone.10-14PrenticeHall,Copyright2009ChannelBehaviorandOrganizationFranchiseorganizationsareacommonformofcontractualverticalmarketingsystem.Typesoffranchiseorganizations:►Manufacturer-sponsoredretailerfranchise:•Fordanditsindependentfranchiseddealers►Manufacturer-sponsoredwholesalerfranchise:•Coca-Cola’slicensedbottlers►Service-firmsponsoredretailerfranchise:•McDonald’s,Avis,andHolidayInn10-15PrenticeHall,Copyright2009ChannelBehaviorandOrganizationHorizontalmarketingsystems:►Twoormorecompaniesatoneleveljointogethertofollowanewmarketingopportunity.Multichanneldistributionsystem:►Occurswhenasinglefirmsetsuptwoormoremarketingchannelstoreachoneormorecustomersegments.►Alsocalledhybridmarketingchannel